SFE - Earnings call transcript Q4 2019 | Safeguard Scientifics, Inc.

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Operator

Good morning and welcome to Safeguard Scientifics Fourth Quarter 2019 Financial Results Conference Call. Please note, this event is being recorded.

I would now like to turn the conference over to John Shave, Safeguard Investor Relations. Please go ahead.

John Shave

Good morning and thank you for joining us for this update on Safeguard Scientifics fourth quarter 2019 financial results.

call and are Vice Mark CFO. today's President Sisko, President on CEO, and Herndon, me and Brian webcast Safeguard's and Joining Safeguard's Senior

today's your our results. and we will a recent During the and Afterwards, will call up and to highlights discuss update review corporate will Mark open Brian call, questions. strategic provide

vary under our of attract interests, to the filings. uncertainties never ability with profitable, and and of operating in include, uncertainties our operate are including among in the interests, to and market to history our uncertainties. to which risks challenges As sectors our be in our operate, presentation a period forward-looking qualified includes losses, described sectors to Safeguard's liquidity and to results ownership economic of ability return always, our the to monetization ownership most of to for to ownership history from our retain actual XXXX interests, interests the statements, achieving ownership competition all risks have fluctuations ownership interests interests, need traded and others, our our manage subject value that our publicly prices and intense the interests, may and ongoing that make limited today's differ our about that market risks our SEC which cause or conditions other competition, valuations existing business at our materially our and registration may a ownership interests ownership those face of in from statements ownership in Act any employees, support avoid the inability and the of value decisions maximum could our to Investment period, control The good fact the interests assets associated the fact ownership interests effective shareholders, of ownership

or are control. to factors the Company's beyond predict ability of Many these

a performance of factors, other relied Company's the financial an of As performance. indication result future be past not as should these and on

encourage to We During and assurance used today's read the today. our be you described SEC, uncertainties in our or associated our words the future not with Management the and in describes any provide as results such to be XX-K goals update including discussions will in statements events will anticipate, statements. forward-looking of believe course as cannot in which that business. filings call, Safeguard's the any made does our any The risks obligation managing assume of expect, forward-looking with Company Form future. intend detail

With that, here is Brian.

Brian Sisko

Thanks, John. early Good support. XXXX, we morning, in pursue you what for started want we you to joining and in XXXX for as we continued head And to thank thank XXXX. your into to us.We do

portfolio to prudently you private interests to interests, our goals return diligently company to to continue the and portfolio monetize support of manner We our maximize efficient to ownership pursue the of and our of most manage the value the possible. in and value

current the companies. and portfolio and our values Today, belief we remaining convey have anticipated want the regarding exit to of the reiterate we you focus our of to strong

We and in the of of successful and return our exits, was successful completion of our capital made series significant the believe The dividend to of opportunities of in forward in stage capital would we earlier of by XXXX of we as important the was repayment in dividend XXXX first strategy, look a Transactis us. like to was milestones return that most that in $XX including of accomplishing a That revisit year front million we the XXXX possible full Propeller December. milestone paid the debt.

our grown $XXX debt in but $XXX portfolio over strategic we via allowed including as The in million only to matured. our six to exit have support XXXX us has balance to not XXXX. over beginning In sheet, appropriate new repay to major that returned began we executed million direction our XXXX aggregate, date, of transactions where have have and and exit as our it transactions to since we continue the since also

valuable our portfolio disciplined approximately sufficient our has of ownership today exit free Safeguard interests. but million capital expected XX deployments. in interests, Safeguard us $XX to representing in hold to portfolio of Most initiating operations down being and to only not The resulted $XXX approach of realizing of also debt companies our provided scaled fund managing deployed importantly, is that with and cash return continues transactions, and our proceeds million other ownership tech-enabled value and a

Our a run have exits. revenue. for million million growing $X companies Six of of are and are rates our whole annual companies $XX as being between and of positioned

Another rates the XX%. is of non-digital six And million. $XX of have growth rate run over companies media average the

occur, all portfolios, with toward stage overcome of and the encouraged group entrepreneurial they each our exits and are that growth As we but to are making we strategic goals. challenges progress there before obstacles will by need their companies remain

shareholders cash in form minimum of forward required either currently $XX capital, the of Whenever exceeding be and/or we million, we equivalents to our share shareholders repurchases the return in straightforward. most return continues efficient have evaluate value dividends. our Safeguard's going to to of will plan value manner a cash and

Annual is exit equity. Safeguard to our align entire directors our our with and reduced being to of director now in cash the effort be We structure of facets opportunities in a either Board XXXX sale to sale the our of To compensation different stakes, four also interest companies, continually paid partner further through preserve downsize to all other and continuing recapitalization six and will evaluating of entirely cost shareholders, methods. companies Meeting, and are SFE as from

realize good and left that accomplished Safeguard's ownership additional yet value stewards are pleased done much that being to While monetize be over to will assets interests exit two be we our and the pursuit transactions value there our return we for our with We is shareholders. shareholders. remain of of years, committed work realized and what to significant we've to last continuing

circumstances alternatives interests the including a in or companies as of the while continue thereof. of individual We sale entire transactions, company sale all dictate, of pursuit market secondary combination partner considering the exits individual company

We of continue shareholders. the value to consider could financing will also transactions return our which expedite to

We our are in assist constantly discussions. companies, to and bank with our opportunities. partner relationships those dialoging have other of significant exit investors of concerning active those place companies in members number board A companies

accomplished our which costs, involving to portfolio also strategy, to and significantly companies, our cash ownership our reduce debt that exceed significant back streamlining new with We debt internal value have forward lot operations including our our retire moving and our under we to continue us equivalents that to cash the program. repaying We've our remain Safeguard, share current our strategic capital companies and regarding implement and bullish and return our our capital allowed of has current believe of interests a transactions of price. returned

We are work much be pleased have with left but is we accomplished, done. what to

referenced to to companies financial and other we news buyer to companies work exits, attention we hope our and continue months. explore to our attract the believe continue with We on share that we strategic mature above. to We coming will and potential exit continue alternatives in as the have more

for the me results. the call let of review Mark the financial over to quarter's turn Now a year's and

Mark Herndon

Brian. you, Thank

million a ended For XX, That's income was XXXX, in per with share. loss $X.XX per compared or or the of $XX.X Safeguard's net net $XX.X share same $X.XX December the for period year million XXXX.

general of Two Our loss loss in comment compared the the fourth impacting the million but per $XX.X XXXX. the resulted costs of of compared $X.XX later our per periods with as position the share $X.XX course elements a per large the net our fourth in included first of share financial further dividend. share speak trajectory and for quarter as a and to prior financial and of to quarter in net quarter continued liquidity results or call, return $X.X capital let million or position. on for same administrative me those downward We'll our $X

no totaled obligations. and Safeguard's securities December debt restricted cash, XXXX equivalents, and cash XX, million, we cash $XX have at

on our discussed down ownership and this years. As have multiple to minimum we structure in corporate scaled fund calls, our fund order the to of is level existing initial determined for follow-on interests necessary support to we've prior targeted capital deployments

to to eager of soon our are continue so. cash process value as as shareholders we returning We do have to additional

the declared $X discussed, Board special was per paid a previously also that XX. we've December share dividend As on

our a return Our previous profits be confirmed that capital year-end earnings results have tax for allow as year-to-date characterized and purposes. dividend federal cumulative this and of analysis to our

Transactis. $XX.X the related I'll million results disclosed gain back a of our Propeller to of a XXXX such from and exit the year, includes Now to gain operations from $XX.X as previously exit move the million the successes for which

in the aggregate million for recorded $X.X and amounts fourth holdbacks including prior other have $X.X XXXX. transactions, we related escrows addition, In of of which additional quarter the for to million occurred received gains of

Our XXXX interest the the million results quarter to impairment NovaSom. also we disclosed our included of in second respect with $X in

the three Our these our comparable absence scaled-down relative lower in and lower general charges ended employee December the overall of fees. for period and in result compared and the were million were the respectively. $XX decrease of to The decrease months of million and primarily staffing, year and XXXX from million expenses of to $X.X staffing. Both year to administrative prior XX, $X.X favorably year compensation the prior a level level is a of severance due professional

which of retirement the compensation, million fourth excluding $X.X expenses, other and corporate quarter quarter, with items, represent XXXX. million or depreciation, general were compared costs For administrative the fourth $X.X and severance stock-based in other expenses, and nonrecurring

December $X.X XXXX, ended the XX, XXXX. million as were expenses compared those in For million same to $X.X

as a costs, fourth impacted to a from facilities, office is reflection stock-based to smaller item. move The to costs, of lower fees as benefit reflect net and cash space, a resulting costs office well our office quarter's relocation fees annual lower fees reductions lower lower fees professional results. director lower XXXX that similarly director from compensation the shift reduction quarter-to-quarter compensation the The overall equity-based of compensation professional the cost the lower the and result during compensation as lower

general we include ongoing benefit that a the for our our also have program related activities costs shareholders. transactional year-to-date reconciliation view to cost the we cash accruals spending. We as throughout from as and significant to reflect that program quarterly measure impact reduction Overall, LTIP to results XXXX the costs. XXXX of administrative and believe rather other begun within these Note regular than an quarterly the item of

look where to reductions continue ways cost will to We continue for possible.

commitments the Our who and estimates under quarterly was the former away liabilities of of primarily removal result Musser our our million $X.X included previous passed the that of other CEO, results income to of also the million Mr. income XXXX. gain $X.X non-cash variety price period the XXXX a $X.X Other from ownership of disclosed annual observable in million the from our previously late of for interests. derivative credit changes included also of

July I credit results related any note of million the that XXXX. was interest interest XXXX. to We in annual our do that facility included not incur during repaid should of expect expense also expense $XX to

interest from of XXXX securities and during income held We the the cash, convertible million first recognition also earnings from short-term primarily income of $X benefited XXXX a account. from was our money of securities the This during of loans. marketable result market and half

interest We in of income to the and level low investable our environment. lower to rate this due expect overall due XXXX decline to assets

cash assets on and to liquidity. As related focused capital and our priority our is reminder, marketable securities preservation a

is value of interests of accounting. December we With from carrying equity reduction a our from method and a to XXXX the impairments ownership respect which application XX, at $XX.X primarily million, XXXX, exits, have

During million. the $XX.X to follow-on limited XXXX we to $X.X deployments companies, million three existing bringing fourth funding quarter, to

so to support to we that million. expect we will the but can interests, we be We in between million in our continue and make those deployments aggregate, $X XXXX additional that expect ownership $XX deployments

ownership as share accounting annual the from our months well XXXX of for losses of $XX.X method comparable method for accounted impairments the Similarly, changes for interest lower our million is in compared less $X.X to to our ended our December was related the a reduction equity losses XXXX, of equity the being net the from companies. we three ownership to share the interests. losses of in experienced XX, Our method XXXX. $X.X companies as exits, result of million period due equity the million of or period, the as of under method decrease our for basis The equity losses

operating of their We to a our of our are results. losses, believe reduced that also pleased of have number overall these We in our contributes the is of health interests. which companies group an this ownership improvements illustration

XXXX, previously have X% of Aggregate for $XXX companies to was was the referred XX a group. XXXX which $XXX growth interests, revenue for for ownership the Aggregate revenue million annual remaining Safeguard's as we for representing partner million. same companies,

slower continued have We growth to in category. digital media see the

media digital partner XX%. companies Safeguard's of the aggregate those of Excluding portfolio year-over-year at revenue companies, grew

Note ownership may you in that the revenue total. table, from other that including see this interests are release, our the from summary excluded

overall that the revenue a of may also have XXXX. our this within context higher stage the morning in portfolio and performance press statistic Within a to portfolio noted release companies number of advanced that from you

So the disclosures, about the indicated we estimates we with provide the of to our aggregated optimistic longer projected as remain amounts. call. earlier revenue portfolio, Brian Also will revenue in no respect

allows growth level of this our individual progressing continues to provides We appropriate that have companies investors the to smaller. confidentiality interests that by us respect the the better size across stages of and believe as defined with through with of get are interests. indications an each ownership revenue we highlighting portfolio Also, that our retain ownership relative to

us the here's Brian Q&A segment the Now to lead through call. of

Brian Sisko

Operator, phone Mark. a few questions, the Thanks, open for let's please.

Operator

[Operator with Please Our CJS question Securities. the line Labick Bob ahead. comes go Instructions] of first from

Your line is open.

Pete Lukas

again Bob. for morning. It's Pete good Hi, Lukas

to sounds question. like along proceeding quick It a is schedule. Just everything according

capital. on Just touched to regard other question, of before in a you've on calls something return had

once at issues In terms previously you blackout kind of with touch you of on buybacks, how there it be still looking could at classified a liquidity share kind bit. one dividend, to a you then dividends look to periods share you if that dividend in as the for mentioned again had any know at of I hampering buybacks. if and again now? just return looking was terms as capital And of would you're expect

Brian Sisko

We'll are hope return our dividend ability But So, we first, is to time. be to it. we do of to that. are opportunities always would point answer for impossible certainly a in it's there particular the question highly answer a to virtually looking at easier at so where dependent that. capital us the upon do And

the proceed predict some difficult very at the possibility exits, But we what on game, end front. it's Now, rules that different as apply. individual through might be added to

we what market, whenever if a the But information, cash from Regarding kind as intrinsic of, situation restrictions to to have impossible the to intrinsic But in will value up. that we have view lining deal differs always and prices once have something. capital price that do want we'll of the material will often doing apply nonpublic of our mechanism. prevailing are that again the legal aren't From buybacks, specific will in with value where it's result a issues to until consider predict always use capital we stock are it us. and the we hand return in to consider standpoint, from the

Pete Lukas

for me. enough. Fair last one And

working to at In terms new Evercore that present, with different on? of anything anything is work you're they've your presented that there with or you them

Brian Sisko

considerations. is No. nothing I if There is as new always don't want sound there new. to

in we mentor. were going we're dynamics as from marketplace view as engaged fact, that use some to going our partner in about Board the well. as there the But influence with as a an on here advisory They're in time not Safeguard this. happen continue individually companies, capacity, to time help necessarily, In to recently and to week talk can although them Board's this our what's about they how of speaking out to

four So at M&A the connected, firms they're in they're well I like moment. country a think top the

have how excellent portfolio. things going impact exiting we're perspective they on the So an that about all the on

Operator

Jim comes question the from McDonald from Analyst. of Our First next line

Jim McDonald

related the that Any affect of you marketing, of could how XXXX, the characterize opportunities? in for specifically state of characterize to and in terms digital softness it? may Could that potential issues kind you exit way your

Brian Sisko

companies to like large when under not a occur. hopefully than sooner chart that a candidates unpredictable have have different will shared a I'm are that indicator don't would have we that's part in we revenue from for or myself exit Well, progressing But calls, exit. we to, think that of I'll anything just rather later sound everyone. the repeating And prior through but I our with LOI the an of situation. be companies lot very in that are stage best it's We

with the our engagements. kind engaged different these that later said is portfolio whether always informal subset companies the Some capacity of We've at with are in processes advisory people earlier bankers, in table with us of alignment before or complete around exits. than our interest in rather considering

that XXXX pursuing regarding happen the anything the predict can't always in I term. activity long are can certainly medium happen and while So we term can quickly in activity,

further in activity to hope coming XXXX. some months exit to the certainly we throughout So announce

Jim McDonald

is marketing, digital part the slowing the of on down? that then And portfolio that

Brian Sisko

an because has overall that on lead regarding in is might digital believe our market things as the also on a a of sector fair of it it well. that our on. insight things that that a good Evercore The going But that what's there media exit transaction the it XXXX marketplace. ability marketplace, one activity some a challenge lot one -- or is tech going there Well, would a the space industry assets, is now, of as negatively while conundrum to Roku-dataxu as media into digital impact that to ad of certainly of in going space, and is of overall amount

market. it's companies, worth but going impact exit So a it to our ability not to I It's too. high don't is say certainly want noting to negatively on those flying

Jim McDonald

of the one marketing, difference that XX% prepared XX%. I said in and think, digital the one in on then the the future, quarter your you it's for press And there? for Brian, the not year? doing excluding growing release, What's them partner Is and but Okay. I remarks, know was revenue. it you're in

Mark Herndon

address Yeah, one. that let me

those. about talked how So a slight in difference of each we've

so the portfolio of right, of together And of companies. one the So each the individual other added rates size, relates related gives the the you number one number. the of to one to companies all growth the average aggregate

Jim McDonald

So of growth XX% the is the average rate the individual companies? of

Mark Herndon

That's correct.

Jim McDonald

Okay. And more just me. from one

money you've about of that? a suggests sort anything QuanticMind in that and a toward which like So bit little bridged. are put round or funding moving are WebLinc into thoughts the -- those quarter of being they Any

Brian Sisko

I'll at correct, leave matter, as are Jim, and say instincts it that a that. general your

Jim McDonald

Okay. Thank you.

Operator

concludes for Shave will remarks. call. today's John back for the This I session call Q&A closing our turn to

John Shave

that questions. as resources We've say our your a In portfolio we experienced for in future monetization toward we soon debt you for and of $XX capital interest your to million plan you continued got Safeguard you working on obligations, to and encouraged always after the joining We're always events, let as we call will valuable the to me for monetization Safeguard. and and today, everybody, for that us operations, be further Thanks, Thank reserve closing, your of about clear return shareholders. are and support a support thank no can events. case. back confidence the

Operator

Thank This participation. for concludes today's conference call. you your

You may now disconnect.

Safeguard Scientifics (SFES) 29 Feb 202019 Q4 Earnings call transcript